Digg Cuts Staff by 37%, Loses Senior Executive

Digg, the social-bookmarking service that has been struggling to right itself after an ill-fated relaunch earlier this year, is laying off more than a third of its remaining staff and has also lost a senior executive to another startup. New Digg CEO Matt Williams — who took over for founder Kevin Rose in late August, and spent his first few days apologizing for the problem-plagued and much-criticized launch of the site’s new features — said today in a blog post that the company has “a burn rate that is too high,” and that it must “significantly cut our expenses” in order to achieve profitability in 2011.

Williams’ comments come just a couple of months after Kevin Rose, who was then CEO, said in an interview with All Things Digital that the company was close to turning a profit and didn’t need to raise additional capital, because it had “double-digit millions” in revenue and had broken even on a monthly basis several times. In that interview, Rose also admitted that he didn’t really like being the CEO and that he realized the company had a “very small window to really get things right” because of the competition in the social networking market. In his blog post today, Williams said that Digg would be unveiling “a new strategy” for growth tomorrow.

Digg launched a new version of the site just a week before Williams was hired, after more than a year of design and testing. But the launch was widely criticized by loyal Digg users, and the company spent the subsequent weeks rolling back most of the changes that it had made and apologizing for the upheaval. Meanwhile, traffic at the site declined sharply — perhaps in part because critics started promoting competitor Reddit.com by posting links to the Digg home page — according to an analysis by Compete. Digg has been under pressure for the past year or more as Twitter and Facebook have stolen much of the momentum that the company initially had as a place for users to share links to interesting content.

It remains to be seen whether cutting staff by more than a third — less than six months after the company reportedly cut its headcount by 10 percent — will buy Digg enough breathing room to recover from its recent woes, or whether the new strategy that Williams mentioned can help it turn the corner.